Passive income: is it possible to earn money by not doing anything at all?
Way to make money while You sleep
Have you ever dreamed about earning money without putting nearly any effort into it? Well, we all have this opportunity - it is called passive income.
Passive income is a money stream that requires little or no continuous effort. Usually, it means an investment at a given moment that will deliver profit someday in the future. You have to make an effort now to choose the best way to invest your money so that it produces more money in the future. However, investing can also be active, and this usually means that you are trading with the goal of beating average index returns. Active investing can be done by yourself or through funds. However, in this article, we will focus on passive income, as well as passive investing.
There are several forms of passive income and none is the only option or the best. Everyone must individually consider the most appropriate ways of gaining income.
However, one should take into consideration that passive income only becomes profitable in the long term.
Skills vs investing
One way to find a passive income revenue stream is to consider your skills. For example, you can create digital products or photographs or some other content that is unique enough to be purchased online by others without your involvement. Nowadays, and during the pandemic, a huge amount of businesses have gone digital so you can take a look around for inspiration. There are also a lot of tools and platforms that you can use to make your products available to people. If the product and sales strategy is successful, this approach will continuously generate passive income for you.
However, doing so requires multiple additional skills and your unique knowledge in some industries might not be enough. You should be aware of platforms and how to make sales there. You should consider the availability of an entity that would optimize income tax issues and allow you to account for expenses incurred while first creating and then maintaining such a product. You will also need some skills to successfully market the product, and there are many other considerations and tasks to be dealt with. Additionally, it does require a substantial commitment in terms of time.
Another possible way of securing a passive income revenue stream is by passive investing. There are several options. You can invest in stock markets, funds, and bonds, but recently P2P (peer-to-peer) and P2B (peer-to-business) investment platforms have become popular and requested by investors, as well as those seeking money for their projects.
For example, Decamel offers several investment opportunities through the platform. You can choose between investing in real estate, startups, or established businesses in need of recurrent working capital for their growth and sales cycles, as well as other fast-growing medium businesses. However, you should always keep in mind that every investment has its risks, as well as the timeframe in which the investment is likely to become profitable.
You make the choice as an investor, but others solve the technicalities for you
Investment through the platform is a good choice from several perspectives. Investors at the beginning of their journeys usually are unable to evaluate risks and gains adequately. In addition, it feels like a full-time job as you need to monitor the deal, make corrections, calculate expenses and taxes… But platforms usually cooperate with and evaluate their projects in consultation with experts. So this task is already done on behalf of the investor and usually, you can rely on all available choices. Moreover, you do not have to worry about taxes and other expenses as this has usually already been taken care of.
In regard to taxes, there are usually two options. The first one is that the platform keeps the tax and during a payout sends you proof that the tax has been deducted from the total amount. This document is suitable to be added to your yearly tax declaration. The second option is that investors should monitor the tax process, as well as pay the tax themselves.
There are some more advantages in the whole investment process if you want to become an investor via the platform. For example, if you are in your twenties or even in your thirties, you might not be able to buy real estate on your own. Even if you can, remember that you will be obliged to deal with tenants, repairs, and unpaid bills… So why bother?
Being part of an investment in a promising real estate project may ensure considerable profit in the long term. And being part of a group of investors means that your money is being placed in better projects of higher value in the future.
Another significant advantage is that you don't need to spend time or pay for the expertise required to manage such real projects, and mitigate risks of ownership or real estate management.The same applies to investments in established businesses in need of recurrent working capital for their business cycles and startups: you have to have a significant amount of money available to lend to a business entity or to become an investor in the company or become a landlord yourself. However, with the platform, you can be a part of the team and participate in financing the next successful and dividend-yielding company or, possibly, a unicorn company that could be worth hundreds of millions or even a billion euros in coming years.
An additional advantage of the platform: monitoring by the platform and availability of status updates
We have already mentioned some of the advantages that the platform offers you in choosing the investment. However, when you have made your choice, the platform will help you to keep track of the success of your investment.
As an investor, you will be able to follow the status updates if you invested in a startup or real estate.
If you have chosen an investment in business loans, you will be able to follow developments with the originator. Usually, of all the aforementioned options, this investment is for the shortest duration, and therefore the most valuable information is financial data.So which form of investing should you choose out of all the available options? You have to keep in mind that business loans are usually made for the shortest period of time: these may be only 1 or 2 months up to one year. This is the best option if you want your money to work for you, while you are deliberating over longer-term investment options. Real estate investments usually pay off in 3 to 4 years and the main advantage is fewer defined risks. The biggest risk of all involves investment in company equity or startups. However, this might also be the biggest gain in the event that the company becomes a unicorn or simply a profitable and dividend-yielding business.
No matter which investment option you choose, you should always remember that in regard to passive investments, a diversified portfolio and limited investment per project are the key.
Although experts have evaluated projects that are offered through investment platforms, there are still some risks, so do not invest all your money in one project. In addition, do not invest more capital in a single project that you would be comfortable losing, no matter how optimistic you are about any such investment.When you have chosen the most appropriate form of investment, decided upon the platform, and chosen the project, you need 5 to 10 additional minutes to be able to set everything up. And this is it!
You are ready to earn passive income through investing!